Sneha's company HR sent her a one-line email: "Pick your regime by Friday — old or new?". No explanation. No worked example. Just a dropdown.
She googled. Got a wall of tables and acronyms. So she called her cousin Manesh (the TDS guide guy). He sat her down and asked one question.
- New regime — lower slabs, but you give up almost everything: no 80C, no HRA, no home-loan interest on self-occupied.
- Old regime — higher slabs, but lets you claim 80C (₹1.5L), HRA, home-loan interest, 80D, and ~70 others.
- The break-even rule: total deductions above ~₹3.75L → old wins. Below → new wins.
- From FY 23-24, new is the default. To stay on old, you must actively opt in.
The one question that decides it
Manesh's question to Sneha: "In a year, do you actually claim more than ₹3.75 lakh of deductions?"
If you stare at that number and think "absolutely not" — new regime, done. If you think "yes, easily" — old regime, done.
If you're somewhere in the middle, you run both calculations. That's it. The rest of this guide shows you the math.
The slabs, side by side
Basic exemption. Identical.
This is where new regime starts to pull ahead.
The biggest slab-level gap. New wins on slabs alone.
Still a meaningful gap.
Top slab kicks in for both. Now deductions decide.
Senior citizens (60+) get a higher basic exemption under old. Verify on incometax.gov.in as Budget can revise.
What new regime takes away
The new regime turned off 70+ exemptions and deductions to fund those lower slabs. The ones you'll actually miss:
- Section 80C (₹1.5L) — PPF, ELSS, EPF, LIC, home loan principal, tuition fees
- Section 80D — health insurance premium
- HRA exemption — for those paying rent
- LTA — Leave Travel Allowance
- Home loan interest on a self-occupied property (let-out is OK)
- 80E education loan interest, 80G donations
What new gives you back: standard deduction of ₹75K (vs ₹50K in old), Section 87A rebate up to ₹7L (so effectively zero tax under ₹7L), and lower slabs in the ₹7–15L band.
Two real cases — same salary, opposite winners
Case A — Sneha: ₹10L salary, just ₹50k 80C + ₹25k 80D
Sneha lives with her parents, no rent, no home loan, recently started SIPs.
Sneha picks: New regime. Done.
Case B — her cousin Manesh: ₹10L salary, ₹6.5L total deductions
Manesh has a home loan (₹2L interest), rents in a different city (₹2L HRA), maxes 80C (₹1.5L), pays health insurance (₹50K 80D).
Manesh picks: Old regime. Different person, same salary, opposite answer.
The math doesn't decide for you — your lifestyle does. Big home loan + rent + investments? Old. Simple salary, no big deductions? New.
The break-even, in one line
For most salaried people in the ₹10–15L range:
👉 Total deductions under ₹3.75L → new regime usually wins
👉 Total deductions above ₹3.75L → old regime usually wins
👉 Right around ₹3.75L → run both; the difference is small either way
If your total taxable income is under ₹7 lakh, the new regime gives a Section 87A rebate that makes your tax practically zero. New is the obvious pick. Don't even spreadsheet it.
What to tell your HR
The declaration you give HR at the start of the year only decides how much TDS gets cut from your monthly salary. It doesn't lock you in.
👉 If salaried with no business income — you can flip at filing time. Picked old with HR but realised new is better? Pick new in your ITR. Refund / balance auto-adjusts.
👉 If you have business / professional income — flipping is restricted. You can opt out of old (move to new) any year, but going back to old is limited to once.
Sneha's final call
10 minutes of math later, Sneha typed "New" into HR's dropdown. Refunds the ₹44k. Doesn't have to chase 80C investments. Doesn't have to keep rent receipts. Done.
In 3 years when she gets married, moves out, takes a home loan — she'll re-run the math. That's allowed.
Quick answers
Salaried (no business income): yes, every year at filing time. Business / professional income: you can opt out of old any year, but going back to old is restricted to once.
Since FY 23-24 made new the default, ~60% of salaried filers go with new. But for those with home loans + HRA + maxed 80C, old is still substantially better.
Employer's NPS contribution under Section 80CCD(2) is allowed in both. Your own contribution (80CCD(1B), ₹50K) is NOT allowed in new regime.
Yes (if you're salaried with no business income). The HR declaration just decides TDS cut from your monthly salary. Your final ITR can pick the other regime and the refund / balance adjusts.
STCG on equity (15%) and LTCG (10% above ₹1L) are flat in both regimes. But your other income's slab still determines whether slab tax applies on top of slab-rate gains.
When you might want help
The decision is straightforward for most salaried filers. Where it gets nuanced: when you have multiple income heads (salary + capital gains + business), when you switched jobs mid-year and your TDS got cut under one regime while filing might favour the other, or when a home loan is about to start and the break-even tilts year-over-year.
Want us to optimise your tax?
We compute both regimes, factor in next year's events, and pick the one that saves the most over a 2-3 year horizon.